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FDA Loses Appeal, Can’t Regulate E-Cigarettes as Drug

Dec. 7 (Bloomberg) -- The U.S. Food and Drug Administration lacks the authority to regulate electronic cigarettes as drugs or devices, an appeals court ruled, upholding a lower-court decision.

The U.S. Court of Appeals in Washington said today the FDA can only regulate e-cigarettes as a tobacco product. The ruling means the government can oversee the marketing of the products, not restrict their sale.

E-cigarette maker Sottera Inc., which does business as Njoy, argued in the case that its products -- battery-powered devices that generate a nicotine vapor instead of smoke -- are tobacco products and not drugs. E-cigarettes are marketed as a tobacco alternative for “smoking pleasure,” rather than for therapeutic uses, the company said.

“We’re thrilled,” Craig Weiss, the president of Scottsdale, Arizona-based Njoy, said in a telephone interview. “Now we can continue to sell e-cigarettes under the regulations of the Tobacco Act.”

The FDA is “studying the opinion and considering next steps,” Jeffrey Ventura, a spokesman for the agency, said in an e-mailed statement. Campaign for Tobacco-Free Kids, a Washington-based group, criticized the decision.

“This ruling invites the creation of a wild west of products containing highly addictive nicotine, an alarming prospect for public health,” the group said in an e-mailed statement. “We urge the government to appeal this ruling to the U.S. Supreme Court.”

FDA Injunction

An Njoy competitor, Smoking Everywhere Inc., filed the original lawsuits in 2009. A district court granted a preliminary injunction barring the FDA from alerting U.S. customs officials to prevent the importation of e-cigarettes manufactured outside the country.

In 2000, the Supreme Court ruled that Congress didn’t grant the FDA jurisdiction to regulate tobacco products as drug-delivery devices under the Food, Drug and Cosmetic Act.

The e-cigarette consists of a battery, a heating element and a cartridge that contains a liquid suspension with nicotine. When a user inhales from the cartridge, the liquid is heated and a vapor is emitted. The nicotine is obtained from tobacco plants.

Njoy sells a “starter kit” for $79.99 that includes two batteries, a charger and five cartridges, Weiss said. Users can buy a bottle of five replacement cartridges for $19.99, with each cartridge roughly equal to 1 1/2 to two packs of cigarettes. A pack of cigarettes in New York costs about $10.

“Great Victory”

Njoy sells products online and at retailers such as 7-Eleven Inc., Weiss said. The closely held company, which doesn’t disclose sales, is profitable, he said.

“This is a great victory for the American people, especially for long-term committed smokers,” Matt Salmon, chief executive officer of Njoy, said in a separate telephone interview.

Salmon, who served three terms as a Republican U.S. congressman from Arizona, became CEO last month after spending more than a year as president of the Electronic Cigarette Association trade group. He described himself as an “anti-smoking crusader” and said that his father died from a smoking-related illness.

The case is Sottera Inc. v. Food & Drug Administration, 10-5032, U.S. Court of Appeals, District of Columbia Circuit (Washington). The lower-court case was Smoking Everywhere Inc. v. U.S. Food and Drug Administration, 09-cv-00771, U.S. District Court, District of Columbia (Washington).

To contact the reporter on this story: Don Jeffrey in New York at djeffrey1@bloomberg.net.

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net

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